New Head of SEC: Cross-Border Swaps Plan At Top Of Agenda

The new head of the U.S.
Securities and Exchange Commission unveiled some of her top agenda items on Friday, saying the agency will focus how to
apply new swaps rules overseas and capital-raising reforms.

The new head of the U.S.
Securities and Exchange Commission unveiled some of her top
agenda items on Friday, saying the agency will focus how to
apply new swaps rules overseas and capital-raising reforms.

Elisse Walter, who took over the agency in December, said a
forthcoming cross-border swaps proposal is "a critical linchpin"
as the SEC finalizes derivatives rules required under the 2010
Dodd-Frank Wall Street reform law.

"That is what is first on the agenda and really stands as
the most important thing we need to do as a prelude to adopting
everything else," Walter said before the SEC's Investor Advisory
Committee, a panel of outside advisers.

Dodd-Frank gave the SEC and the U.S. Commodity Futures
Trading Commission (CFTC) authority for the first time to
regulate the opaque $640 trillion over-the-counter derivatives
market, which was a destabilizing force during the financial
crisis.

New rules will require firms that deal in swaps such as
Goldman Sachs Group Inc and Morgan Stanley to
register with regulators.

To reduce systemic risks, many products will need to be
routed through clearinghouses that guarantee trades, and some
must be executed on regulated trading platforms for price
transparency.

Global regulators are committed to similar rules, but have
not figured out how to apply the rules in each country to
international transactions.

The CFTC, which will oversee the bulk of the derivatives
market, has proposed a blunt approach subjecting foreign banks
to the same rules as the U.S. market if they wish to do business
with U.S. firms and if they exceed $8 billion in swaps trading a
year.

The CFTC has been criticized because its staff issued a plan
in the form of guidance instead of a more formalized and
demanding rule-making process.

The SEC has been praised by lawmakers and others because it
is coming up with a formal rulemaking proposal that will include
an economic analysis of how a cross-border application of new
rules would impact the industry.

Both U.S. and foreign regulators have been in talks over how
to reach agreement on this issue.

JOBS ACT ALSO PRIORITY

Walter also plans to prioritize rule-making required under
the 2012 Jumpstart our Business Startups (JOBS) Act. The law
aims to help small businesses raise capital by loosening
securities regulations.

The SEC is currently drafting a rule included in the law
that would lift a longtime ban on general advertising for
private placements.

Lifting the ban would make it easier for hedge funds to
reach potential investors for private offerings.

But investor advocates, including members of the SEC's
Investor Advisory Committee, have criticized the proposal,
saying it fails to include safeguards to prevent fraud.

The SEC is currently divided between two Democrats and two
Republicans. Both Republicans support going ahead with the
proposal as written, while Democratic Commissioner Luis Aguilar
wants it scrapped, and adding more investor protections.

Walter, also a Democrat, said Friday the SEC is "looking
very hard" at how to move forward.

She has raised concerns over the lack of investor
protection, but did not tip her hand about how a final rule
would look.

She emphasized the agency must act due to Congress' mandate.
But she added that "nothing will come out of this building
unless it has the votes" from a majority of commissioners.